As the market faces instability amid the collapse of a major bank, Apple’s performance suggests it could serve as a stable investment option for investors seeking a safe haven.
- The collapse of Silicon Valley Bank’s parent company has caused instability in the equity market, with the regional bank ETF losing 21% in the last five trading days.
- Amidst the turbulence, Apple has remained a stable investment option due to its reputation, financial strength, and well-established demand for its products and services.
- While not immune to market turbulence, Apple’s performance in recent weeks suggests that it could serve as a safe haven for investors seeking secular stability in their stock portfolios.
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In recent days, the collapse of Silicon Valley Bank‘s parent company (SIVB) – Get Free Reporthas been causing a stir in the equity market. Although regulators have intervened to prevent the worst from happening, the regional bank ETF (KRE) – Get Free Reporthas already lost 21% in the last five trading days.
While Monday, March 13, did not provide any relief to bank stocks, Apple stock (AAPL) – Get Free Reporthas remained a rock of stability in the market.
AAPL Holds Up Well
Shares of the Cupertino company traded just short of flat over the previous week, while the S&P 500 and Nasdaq 100 have accumulated losses of 3% and 2%, respectively. This suggests that investors have been favoring secular stability, and Apple has been one of the beneficiaries.
One reason for this could be that Apple has established itself as a highly regarded consumer company that makes and sells products and services that are in high demand. This is especially important in the face of an economic slowdown, which many assume will happen in 2023.
Also, Apple is large and well-capitalized, with a net cash balance of $54 billion. During this period marked by a historic bank run and fears of more to come, having a solid balance sheet is a huge asset to own.
Worth pointing out, the market is not only shying away from risks associated with the banking sector, particularly regional banks, but also from risk in general.
Since March 8th, the VIX, also known as the fear index, has rallied over 35% to a reading of 26. The long-short low-beta fund BTAL, an ETF that benefits from lower-risk stocks outperforming higher-risk ones, has also jumped higher during the same period.
Apple: A Safe Haven So Far
The lesson learned here is that Apple can serve as a safe haven in the equity market when the backdrop is largely unfavorable.
To be very clear, the Cupertino company may still be affected by serious challenges, as it has in the past few months with the supply chain constraints. It would be incorrect to assume that AAPL will successfully sidestep market turbulence altogether. The stock is still volatile to a large extent, and sharp losses could occur.
However, it is becoming more apparent that Apple stock could be one of the main pillars of a stock portfolio, unshaken by jitters that hurt much of the rest of the stock market. AAPL seems to have the stability and financial strength to weather market storms better than many other stocks.
It is important to note that Apple is not the only company that can provide secular stability in the equity market. There are other large, well-capitalized companies with solid balance sheets that could serve as safe havens.
However, Apple has been proving to be one of the best examples of such a company, and its performance in recent weeks underscores this.
The Key Takeaway
In conclusion, the recent collapse of Silicon Valley Bank’s parent company has caused chaos in the equity market. However, Apple has remained a rock of stability, largely due to its well-established reputation and financial strength.
Investors may want to consider adding Apple stock to their portfolios, especially in times of market turbulence. It may not be a perfect hedge against volatility, but it is likely to perform better than many other stocks in such conditions, in my view.
(Disclaimer: this is not investment advice. The author may be long one or more stocks mentioned in this report. The article may contain affiliate links, but these partnerships do not influence editorial content. The author may use AI tools, including OpenAI’s ChatGPT, to create and summarize some of the article’s content. Thanks for supporting the Apple Maven.)
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